We're gonna need more sheep

Are you a knitter or crocheter? Chances are if you are not one, you probably know one. The announcement of widespread US tariffs last week is poised to have an outsize impact on this industry, due to how the global supply chain for wool works. I’m sharing a series of stories on how different areas of artisan craft are impacted by the US tariffs. I’m going to be gently exploring way through many different areas of craft. My goal with this series is to help share the complex realities of the global supply chain for many artisan businesses. These realities have been further complicated by the closure of Joann Fabric in the US, one of the large retailers of yarn.

In the first part of this article, I will review the industry. I will also explore what would be needed to truly rebuild the industry in the US. In the second part of the article, I will share perspectives on the tariffs for local yarn stores. The economic impact and effects are far larger than most people realize. Even if you are are not involved in the wool industry- you may find this interesting. Let’s dig in!

Please note- this is a dynamic situation and I will do my best to keep this article updated with relevant information but it is playing a game of whack a tariff to keep up.

Industry Review

40 million knitters and crocheters. That is almost 12% of the population. So gather up 9 friends and look around- one of you is a knitter or crocheter. They are just hiding it under their desk while on that conference call. They are also that co-worker or friend that somehow seems to remain in great mental health (spoiler alert- crafts help your mental health). But that is just the start of the economic impact of the wool industry. Some further information:

A common comment floating around on social media in response to the tariffs is “Just buy it locally” which fails to acknowledge the real supply chain. Our supply chain is not built to reliably produce enough wool to support this industry. And that is to support the existing industry in this country, and not try to produce more textiles or other products. It starts all the way at the beginning of the supply chain. There are gaps at every single step of the supply chain. So what would it actually take in order to fill the gap? Let’s explore it.

As a little side note, if you are outside the USA - I am also planning future articles about what is happening to the wool industry in other countries. There are many similar challenges as in the US, and some additional nuances. There is a lot...

Need more sheep farmers and proper economic incentives to raise wool

The first step in the supply chain is the farmer. Without farmers, land, and access to pastures, you can’t even get the process started. According to the USDA 2022 Census data, there are around 27,000 farms producing wool in our country.

The majority of sheep farmers in our country are raising sheep for meat, not wool. It’s simply due to the economics of the wool market. I asked Lindsey Spoor, a shearer and Yarn Shop owner, to help me understand the economics of wool for the farmer.

While wool is produced in all 50 states, the bulk of the production comes from five states:

Investing in the farms to produce this many sheep would mean we would need substantially more sheep farmers. Like anything in farming, you don’t just start doing this at a large scale. It takes time and a substantial amount of capital (to purchase or rent the land and grow the herd). Frankly, purchasing the land is probably out of the question. You would have to rent it.

Since the price of wool is so low, you are also going to need ongoing economic subsidies for the farmers if you want this wool. Put yourself in the farmer’s shoes- why would they raise wool at scale if there is no profit? Do you work for no money? The price of the wool would need to at least be comparative to lamb prices which means new subsidies are needed. That way the farmers that actually have the skill-set to raise sheep would have an incentive to do so.

That is the first challenge.

Breed more sheep

If we could secure enough farmers and enough land, the next step in the process is producing more sheep. The US Sheep population has dropped by approximately 90 percent since World War II. We would need to dramatically increase the size of the sheep herds. How long would this take?

We would have to continue to increase herd sizes, and its a bit too difficult to estimate at this point as we can’t really get detailed numbers to do this. Suffice it to say it will take many years simply due to gestation periods and birth cycles.

Train more shearers

To get the wool off the sheep, you need sheep shearers. There isn’t an automated process than can magically be scaled up to do it. It is hard physical labor. There are not enough sheep shearers with our current flock sizes. We are definitely going to need more shearers for those sheep.

The sheep shearing competitions you also see are not reality for the time it takes. No one is as fast as those competitions on an ongoing basis.

If we wanted to add shearers, we would need more classes to be available, and many more people willing to shear sheep.

Processing Mill capacity

There is also a shortage of processing mills for wool. At least 3 large mills have closed in the last year in the US. My sources share that it is now common to see 12-14 month waiting times to get your wool processed for small farmers. Here, mini-mills do represent a good business opportunity. There is already excess demand in the existing market.

The challenge here will be sourcing the equipment to start the mini-mill. Many of the established manufacturers are from Canada, Europe and China. There can also be a substantial equipment cost. How about a reference for what this might cost to purchase a mini mill?

Earlier this year, Searsport, Maine farmer Amber Mazza inquired and obtained much of the equipment left over from the closure of the Jagger Spun mill.

This provides us with a reference for the cost. Mini-mills were already expensive. Many of these mills will require the business owner to obtain financing. In an environment where your mini-mill could cost you 125% more (due to the current China tariff), what bank will sign up to finance that? Even 10% tariffs add a significant cost burden, making these capital purchases out of reach for most people. Increased equipment costs add more risk to any new mini mills as it adds to their cost burden and break even points for profitability.

Cost Summary:

As we tally up the costs to actually substantially increase our wool production, it’s easy to see how it will be incredibly expensive to do this. One off small herds might be able to do this for substantially less. But that won’t scale. If we truly want to build the industry back here, it will require:

• More farmers with pasture land and ongoing economic incentives to raise wool

• More sheep

• More shearers

• More milling capacity and people willing to run mills

Okay, now that we have completed the initial exercise to look at what it would take to build the supply chain in the US, what about the impact of the current tariffs?

Impact on Local Yarn Stores

Let’s talk about what happens to our local yarn stores next. The effect on the local yarn store is what drew me to this topic in the first place. As a burgeoning knitter myself, the tariffs immediately raised a red flag as a serious challenge.

Local Yarn stores are third spaces. They are places to gather round the table, feel included, and be part of a community. They are part of the social fabric of our towns and communities. They are places where you can go wander the aisles, chat with the owner, and touch all the yarn while dreaming of what wonderful things you might make if only you had more time. And then buy a skein to add to your yarn stash (shhh…. don’t tell). I’m told from trusted sources that you can NEVER have too much yarn in your stash. Yarn stores are NOT easy businesses to run. And China just so happens to be one of the largest producers of yarn.

I had the opportunity to talk with Lindsey Spoor of Stilly River Yarns to understand the economics of the local yarn store and what all these tariffs mean for her business. Here is what she shared with me:

Can you share more about where your yarn comes from?

“Most of my yarn is sourced from Peru, Turkey, Spain, France, and New Zealand. I do have 3 US lines that I carry. The average margin on yarn is a little over 50% for my shop. That 50% has to cover my overhead, rent, utilities, and staffing costs. 10-20% more of a cost really hurts my business- it’s not sustainable for us to just absorb these costs.

I would love to dream of a time when we could produce enough wool in the US of enough varieties that my customers want. But the reality is that we just are not there yet. And the supply chain challenges of our industry make that very difficult to build. It would take us decades to get there.

We do have some spinning, weaving, and felting supplies from the US, but simply not enough yarn variety. This isn’t unique to my shop- it affects all yarn shops.”

Is yarn the only product that is affected?

"No, in reality many of our products are affected. Let’s take knitting and crochet needles as an example. We get these from China, Nepal, and Japan. We literally cannot source them domestically. And this isn’t something where artisan businesses could step in and make them. It requires incredible precision to get it right- the tolerance are so small because there is a quarter millimeter between sizes.”

Does this challenge feel similar to the challenges of COVID- or different?

“During COVID many of us saw the Lipstick effect. During a recession or downturn the consumer will still spend money on small affordable luxuries. This one feels different. So far, the consumer is scared and is holding back from purchasing.”

This mirrors exactly what I have been hearing from many artisan businesses. Spending on discretionary items is down. Less early in the year sales. Marketplaces and e commerce are much quieter this year.

As a consumer, recognize that your local yarn store owner will likely have to raise prices, and raise them soon. It’s simply the economics of the re-order cost. If manufacturers pass the costs on to the retailer, there will be little recourse for the retailer. If the next re-order is 20% more expensive, they have to come up with 20% more capital. Margins for most stores are already tight, and the rent and utilities will still be due. You still have to pay staff. It has to come from somewhere. I asked Lindsey how she is going to approach this challenge:

“This is all still very new and fresh, and we haven’t even had time to absorb it yet. First we have to see what we hear from our suppliers. We are still in fact gathering mode. We may have to eliminate some yarn lines and simplify what we stock. I’ve been making sure to educate customers the last few months when they buy yarn on where it comes from, so that they are prepared. We may also have to adjust our loyalty programs. It’s a difficult conversation, but something will have to give.

It’s really challenging for us. If we had known this was coming at this scale months ago, we could have planned better. I would not have invested in moving to a larger retail space if the economy wasn’t booming. Right now it is very uncertain, and we are taking it one day at a time in navigating the uncertainty.“

So this is the impact on the local yarn store. But this will also affect the indie yarn dyers, the pattern designers, the book writers, the small knit and crochet businesses, etc. This is the knock on effect on other small businesses.

Many individual knitters and crocheters will be fine for now because they will stash dive. (i.e. finish existing products). It’s easy to be hard-hearted and say this is simply a necessary time as this industry must be rebuilt. Especially if you are not a knitter or crocheter. Or if it is not your business that must face these challenges.

Some Final Thoughts

Most of us have a soft spot for the knitters and crocheters of this world. They quietly work away on projects and create special beautiful things. They are the ones that create the extra soft baby blankets to welcome your new infant. The adorable little booties. They make endless socks and sweaters and bring a sense of calm to our chaotic world. Who doesn’t love comfy knit socks? Every once in a while, their knit ball rolls down the aisle while we are on airplanes. We all smile and gently help get it back together without tangling it.

So many things that they make are gifts and are about the recipient, not even about them. Do we really want to jack up the price of yarn, knitting needles, and slow down their ability to do their work? Do we want to put at risk thousands of small yarn store businesses and the staff they employ? The large companies will find a way to survive, but what about the small business? The industry is already reeling from the closure of Joann and loss of access to yarn for so many in smaller communities.

I’m going to risk the hate mail, nasty comments, and unsubscribes with my final questions for you as the reader. This is such a hard topic and I have done my best to genuinely answer what it would take for us to rebuild this industry. Now I will ever so gently ask you- are we sure this is really the only option? If this is the only option, how much are we willing to pay to rebuild? And where is that money going to come from?